Offices: Changes in Market Conditions

Since office construction is still active and could enter a phase of over-supply, combined with the strong increase in telecommuting, the market could face a contraction in the coming months.

Monday, August 3, 2020

Because of the spread of covid-19, governments in Central America have decreed strict home quarantines. This scenario boosted the implementation of telecommuting and forced companies to adapt to a new form of operation.

In this context of economic crisis combined with the change in work habits, the Costa Rican office market has already begun to report signs of what is coming in the near future.

You may be interested in "Real Estate Supply: How do Prices Behave?"

Data from the firm Colliers International show that the number of square meters available in the supply market has grown by 38% in the last year, from 90,503 m2 to 125,333 m2, between June 2019 and the same month in 2020.

Pablo Fernandez, country manager of Colliers Costa Rica, told that "... The office real estate market, specifically if seen in conjunction with class A+ and A offices, is in a transition phase. The current circumstances may cause the sector to eventually enter a stage of over-supply, due to the fact that construction is still active, with a growing trend towards mixed-use projects."

See "Rentals: Lower Occupancy, Lower Prices"

Although the market as a whole could face a complicated scenario, different realities coexist for the time being. The article reviews that "... Currently Carthage is the province that presents the highest rate of market availability with 24.88%. A very different panorama is shown to the north of San José; whose office availability is 1.60%."

According to specialists, when the indicator exceeds 10%, it means that the market is no longer healthy.

Panama is another country in the region that expects significant variations in the coming months. In May it was reported that due to the health and economic crisis, the inventory of available properties will increase, a situation that will put downward pressure on property prices and rents, affecting mainly the office and commercial space segment.

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More on this topic

Office Rental: Market Correction

March 2021

The oversupply of office space and changes in the dynamics and ways of working of companies have led the office rental market to a corrective or adjustment phase, which is mainly evidenced by the downward pressure on rental prices.

At the beginning of 2021, CentralAmericaData expected that in the coming years, 4 out of 5 companies will bet on hybrid work modalities, which include face-to-face and remote activities. This phenomenon will force office supply to adjust to the new market conditions.

Real Estate Market: Challenges and Opportunities

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The commitment to long term rentals instead of vacation rentals, preference for larger residences and innovation in the marketing tools of the projects under development are some of the changes expected in the coming months, which could set a new pattern in the sector.

The health crisis caused by the spread of covid-19 ended up changing consumer habits in all Central American markets.

Real Estate Market: Prices in the New Reality

May 2020

It is predicted that in Panama due to the health and economic crisis the inventory of available properties will increase, a situation that will put downward pressure on property prices and rents, affecting mainly the office and commercial space segment.

Directors of the Panamanian Association of Real Estate Brokers and Developers (Acobir) estimate that in the context of the health crisis resulting from the covid-19 outbreak, sales or rental prices in the local market could contract between 20% and 25%.

Rentals: Lower Occupancy, Lower Prices

May 2020

As a result of the crisis, the unemployment rate of commercial premises in Costa Rica rose from 8.81% to 9.86%, and the average price per square meter fell by 3%.

It is estimated that 20% of the stores located in the country's malls will not be able to open after the most critical phases of the covid-19 outbreak are overcome, according to Colliers' figures.

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